The process to establish another stock exchange in the country has finally emerged on the horizon with the Supreme Court clearing the way for the Securities Board Nepal (Sebon) to issue licenses to operate stock and commodity exchanges, and stock brokerage firms. Following the court's verdict, Sebon has invited applications from interested parties.
Pratik Ghimire of ApEx talked to Ramesh Kumar Hamal, Chairman of Sebon to talk about the changes the issuance of licenses will bring in the capital market, among other topics. Excerpts:
How is Sebon moving ahead after the Supreme Court cleared the way to issue licenses for new stock exchange and stock brokerage firms?
As soon as the Supreme Court rejected the writ petition, we invited applications from interested parties for a new stock exchange and commodity exchange. As the deadline is over, we will review all the applications and proceed with license issuance as soon as possible. There will be no unnecessary delay from our side. We will provide a written note with reasons to those who have their applications disapproved.
Why has Sebon deemed the issuance of licenses necessary for the growth of the capital market in Nepal?
As the number of investors in the stock market has surged massively over the last few years, we need more than the existing 50 stock brokerage firms to provide better services to investors and better market practices. This is why, Sebon is also issuing new licenses for brokerage firms. It is also equally important to understand that increasing numbers alone is not sufficient, there should be better corporate governance practices and the firms should play a role in reducing costs for the investors and providing reliable services.
The rationale behind the new stock exchange and additional brokerage firms is to create a competitive market that will be beneficial to all. I am a strong believer in the fact that without competition, there will be no progress. The new stock exchange is the need of the hour. I am an advocate of good governance and believe good practices should be maintained in every private and government institution. People who are capable should always get the opportunity to work. The same goes for the security market too. The license is necessary for the growth of the capital market. It will open the doors of opportunity for 30m Nepalis.
Which areas Sebon is currently focusing on for improvement of the securities market?
Sebon is currently working to maintain good governance in the capital market. We want to ensure investors get prompt services and face no hassles in their capital market dealings. Besides working on issuing new licenses for the stock exchange, brokerage firms, and commodity exchange, we are also bringing small and medium enterprises (SMEs) into the capital market. We are also working on updated rules and regulations needed for the capital market. There are around 1,200 large tax paying companies in Nepal.
But less than 100 of them are listed in the secondary market. Sebon aims to list at least 400 of them in the next fiscal year, 600 in another fiscal year, and 1,000 within the next five years. The listing of these companies will help the market grow, which ultimately helps the national economy.
Tell us more about the SME platform that Sebon is planning to introduce.
I have been active for a long time to bring SMEs to the capital market through a separate platform. We can implement it within about two months if everything goes as planned. What we are trying to do through this is to inspire small businesses to come to the capital market. If large companies and small companies are kept in separate indexes, it helps in the overall development of entrepreneurs from every corner of the country. It will then help to increase the size of the country’s economy.
We have done great work in private equity ventures because it is an international practice that is successful across the globe. With the traditional banking system, it is not possible to grow our economy. Hence, the growth of private equity has become important. It will also attract foreign investment. But we don’t have the domain of private equity ventures. We are working on it.
It’s been over a year since you took the helm of Sebon as the chairman. What challenges have you encountered in this period?
I am very satisfied with my work. There were challenges of course but I faced them because I never compromise on good governance. I will always advocate bringing the world’s best practices. Some people wanted to create hurdles from the day I assumed office by spreading rumors and character assassination.
But I guess they failed. I think investors and other stakeholders trusted me because I have been working by prioritizing investors and markets at the center of everything. I have been utilizing my experience and knowledge from international markets.
What are your major achievements so far?
We brought the C-ASBA charge down to a maximum of Rs 5 which was up to Rs 100 previously. Sebon also worked on a fast-track basis to provide a 10 percent quota for migrant workers in the initial public offerings (IPOs) which has helped to increase the inflow of remittances through the legal channel. We have cleared up confusion regarding the mergers of publicly listed companies.
Now any application for merger/acquisition should be approved within three days through the integrated guidelines. Previously, these cases were suspended for years. We have arranged that the trading of shares of any company going for merger/acquisition should not be suspended for more than 15 days. In the meantime, we made it possible for the process of IPOs to conclude in 15 days.
How is Sebon working to put a stop to insider trading and other manipulative activities in the securities market?
In the 30-year history of Sebon, this is the first time that we have penalized people found guilty of insider trading. We have concluded two such cases and have adopted a zero-tolerance policy regarding the malpractices in the capital. The market will be fairer as insider trading and other manipulative practices will be strongly dealt with.
